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Advanced economies borrowed substantially during the Covid recession to fund their fiscal policy. The Covid recession differed from the Great Recession in that sovereign debt markets remained calm and spreads barely responded. We study the experience of Greece, the most extreme manifestation of the puzzling behavior of spreads during Covid. We develop a small open economy model with long-term debt and default, which we augment with official lenders, heterogeneous households and sectors, and Covid constraints on labor supply and consumption demand. The model is quantitatively consistent with the observed boom-bust cycle of Greece before Covid and salient observations on macro aggregates, government debt, and the sovereign spread during Covid. The spread is stable despite a rise in external borrowing during Covid, because lockdowns were perceived as transitory and the bailouts of the 2010s had tilted the composition of debt at the beginning of Covid away from defaultable private debt. The ECB's policy of purchasing debt in secondary markets during Covid did not stabilize spreads so much, but allowed the government to provide transfers that reduced inequality [ABSTRACT FROM AUTHOR]

As of 2022, the share of U.S. income accruing to labor is at its lowest level since the Great Depression. Updating previous studies with more recent observations, I document the continuing decline of the labor share for the United States, other countries, and various industries. I discuss how changes in technology and product, labor, and capital markets affect the trend of the labor share. I also examine its relationship with other macroeconomic trends, such as rising markups, higher concentration of economic activity, and globalization. I conclude by offering some perspectives on the economic and policy implications of the labor share decline. [ABSTRACT FROM AUTHOR]

We present new evidence on the labor market effects of large minimum wage increases by examining the policy changes implemented by Minneapolis and Saint Paul. Beginning with synthetic difference-in-differences methods, we find that the increase in the minimum wage decreased substantially restaurant and retail employment, even after accounting for potential confounding effects from the pandemic and civil unrest. Next, using variation in exposure to the minimum wage across establishments and workers within zip codes and industries of the Twin Cities, we find employment effects that are about half as large as those from the time series. The cross-sectional estimates difference out contemporaneous city-industry effects across establishments and workers, but they do not include equilibrium effects induced by the minimum wage such as changes in entry. We quantify a model of establishment dynamics to reconcile the different estimates and argue that they plausibly reect lower and upper bounds of employment losses. We use the model to show that our estimates are consistent with an establishment elasticity of labor demand of --1 and illustrate how they can inform deeper parameters characterizing product and labor market competition, factor substitution, and establishment dynamics. [ABSTRACT FROM AUTHOR]

Greece experienced a boom until 2007, followed by a collapse of unprecedented magnitude and persistence. We assess the sources of the boom and the bust, using a rich estimated dynamic general equilibrium model. External demand and government consumption fueled the boom in production, whereas transfers fueled the boom in consumption. Different from the standard narrative, wages and prices declined substantially during the bust. Tax policy accounts for the largest fraction of the bust in production, whereas uninsurable risk accounts for the bust in consumption and wages. We assess how the composition of fiscal adjustment and bailouts affected the crisis. [ABSTRACT FROM AUTHOR]

Using merged administrative datasets from Minnesota, we bring new evidence on the labor market effects of large minimum wage increases by examining the policy changes implemented by Minneapolis and Saint Paul. We begin by using synthetic difference-in-differences methods to estimate counterfactual outcomes at the zip code level from Minnesota and at the city level from the rest of the country. The minimum wage did not affect employment in most industries but exerted a negative impact on restaurants' employment, with an elasticity of -0:8. Next, using variation in exposure to the minimum wage across establishments and workers within the Twin Cities, we find employment effects that are half as large as those from the time series. The cross-sectional estimates difference out employment effects from the pandemic or civil unrest that could confound the time series comparisons, but they do not include potential effects of the minimum wage operating through equilibrium adjustments such as entry. We quantify a model of establishment dynamics to reconcile the different estimates and argue that they plausibly reect lower and upper bounds of employment losses. We use the model to show that our estimates are consistent with an establishment elasticity of labor demand of -1 and illustrate how they can inform deeper parameters characterizing product and labor market competition, factor substitution, and establishment dynamics. [ABSTRACT FROM AUTHOR]

Reparations is a policy proposal aiming to address the wealth gap between Black and White households. We provide a first formal analysis of the economics of reparations using a long-run model of heterogeneous dynasties with an occupational choice and bequests. Our innovation is to introduce endogenous dispersion of beliefs about risky returns, reecting differences in dynasties' experiences with entrepreneurship over time. Feeding the exclusion of Black dynasties from labor and capital markets as driving force, the model quantitatively reproduces current and historical racial gaps in wealth, income, entrepreneurship, mobility, and beliefs about risky returns. We use the model to evaluate reparations and find that transfers eliminating the racial gap in average wealth today do not lead to wealth convergence in the long run. The logic is that century-long exclusions lead Black dynasties to enter into reparations with pessimistic beliefs about risky returns and to forego investment opportunities. We conclude by showing that entrepreneurial subsidies are more effective than wealth transfers in achieving racial wealth convergence in the long run. [ABSTRACT FROM AUTHOR]